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posted Jun 5, 2019 11:19:16 PM

Can I deduct a business gift given on my Schedule C?

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1 Best answer
Level 7
Jun 5, 2019 11:19:22 PM

Yes, within limits.

From the IRS:

"Question
Are business gifts deductible?
Answer

If you give business gifts in the course of your trade or business, you can deduct all or part of the costs subject to the following limitations:

  • You deduct no more than $25 of the cost of business gifts you give directly or indirectly to each person during your tax year.
    • If you and your spouse both give gifts to the same person, both of you are treated as one taxpayer.
    • Incidental costs such as engraving, packing or shipping aren't included in the $25 limit if they don't add substantial value to the gift.
    • For purposes of the $25 per person limit, don't consider gifts costing $4.00 or less that have your business name permanently engraved on the item and which you distribute on a regular basis.
  • You need to have records that prove the business purpose of the gift as well as the details of the amount spent."

9 Replies
Level 15
Jun 5, 2019 11:19:18 PM

Gifts are not taxable, deductible or reportable on any tax return, if they are less than 5.2M. Note that for a business, there is a difference between a gift, and "free samples". Assuming what you gave away was inventory, you just include the cost of your "free sample" in the COGS section.

Not applicable
Jun 5, 2019 11:19:19 PM

wrong

Level 15
Jun 5, 2019 11:19:21 PM
Level 7
Jun 5, 2019 11:19:22 PM

Yes, within limits.

From the IRS:

"Question
Are business gifts deductible?
Answer

If you give business gifts in the course of your trade or business, you can deduct all or part of the costs subject to the following limitations:

  • You deduct no more than $25 of the cost of business gifts you give directly or indirectly to each person during your tax year.
    • If you and your spouse both give gifts to the same person, both of you are treated as one taxpayer.
    • Incidental costs such as engraving, packing or shipping aren't included in the $25 limit if they don't add substantial value to the gift.
    • For purposes of the $25 per person limit, don't consider gifts costing $4.00 or less that have your business name permanently engraved on the item and which you distribute on a regular basis.
  • You need to have records that prove the business purpose of the gift as well as the details of the amount spent."

Level 15
Jun 5, 2019 11:19:24 PM

Just a note
"?If you and your spouse both give gifts to the same person, both of you are treated as one taxpayer."
Doesn't apply in this specific instance, since it's the business giving the gift and it was specifically noted a "SCH C" business which can only have one owner. Note that a business gift is not a SCH A itemized deduction.

Not applicable
Jun 5, 2019 11:19:27 PM

If you give gifts in the course of your trade or business, you can deduct all or part of the cost. You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year.




SEE IRS PUBLICATION 463 THE GIFT SECTION FOR MORE INFORMATION

https://www.irs.gov/publications/p463

Level 2
Aug 21, 2021 11:24:05 AM

Business gifts are deductible up to $25 (see specifics in the tax code), and this $25 is in addition to shipping/tax.   But I will tell you based on some Schedule C audits, the IRS thinks it is just $25....   eg.  You send flowers for $50....$25 is for the flowers and $25 is for delivery/tax.   The whole $50 should be deductible as a business expense, but the IRS adjusted it to $25, which actually isn't correct.   

Level 2
Aug 21, 2021 11:24:41 AM

Business gifts are deductible up to $25 (see specifics in the tax code), and this $25 is in addition to shipping/tax.   But I will tell you based on some Schedule C audits we are aware of, the IRS thinks it is just $25....   eg.  You send flowers for $50....$25 is for the flowers and $25 is for delivery/tax.   The whole $50 should be deductible as a business expense, but the IRS adjusted it to $25, which actually isn't correct.   

Level 2
Aug 21, 2021 11:26:46 AM

To handle reporting the extra costs over $25 for business gifts for delivery and tax, report that extra amount under "Other business expenses as postage/delivery" and the tax a separate line as well.